TEA domain (TEAD) family transcription factors are key regulators in development, tissue homeostasis and cancer progression. TEAD4 acts as a critical downstream effector of the evolutionarily conserved Hippo signaling pathway. The well-studied oncogenic protein YAP forms a complex with TEAD4 to regulate gene transcription; so does the tumor suppressor VGLL4. Although it is known that TEAD proteins can bind promoter regions of target genes through the TEA domain, the specific and detailed mechanism of DNA recognition by the TEA domain remains partially understood. Here, we report the crystal structure of TEAD4 TEA domain in complex with a muscle-CAT DNA element. The structure revealed extensive interactions between the TEA domain and the DNA duplex involving both the major and minor grooves of DNA helix. The DNA recognition helix, α3 helix, determines the specificity of the TEA domain binding to DNA sequence. Structure-guided biochemical analysis identified two major binding sites on the interface of the TEA domain-DNA complex. Mutation of TEAD4 at either site substantially decreases its occupancy on the promoter region of target genes, and largely impaired YAP-induced TEAD4 transactivation and target gene transcription, leading to inhibition of growth and colony formation of gastric cancer cell HGC-27. Collectively, our work provides a structural basis for understanding the regulatory mechanism of TEAD-mediated gene transcription.